Austrian Chancellor Werner Faymann has signed a landmark deal with Russian Prime Minister Vladimir Putin for Austrian contractors to build part of Russia’s South Stream gas pipeline.

The agreement marks an important milestone in the race to provide Europe with a reliable gas supply.

Faymann insists the South Stream project presents no conflict of interest for Austria which is also involved in the construction of the EU’s rival project, the Nabucco pipeline. Baumgarten in Austria will serve as the storage centre – or the Central European Gas Hub – for both projects.

South Stream will see Russia’s Gazprom working in tandem with Austrian energy provider OMV and engineers from Italys’s ENI.

In an effort to ensure its gas energy market share in Europe, Russia has ordered the construction of two pipelines. North Stream which will terminate in Germany and South Stream – which is competing with the EU’s Nabucco project.

South Stream will deliver 63 billion cubic metres of gas per year, the construction costs are estimated at around at 10 billion euros and it is due to be completed in 2015.

Nabucco will deliver 31 billion cubic metres of gas per year, its construction costs are estimated at 7.9 billion euros and it is scheduled to start delivering gas in 2014.

The EU’s Nabucco project – which is backed by the US – is being built to “diversify” supplies and wean Europe off its dependence on Russian gas.

But one thing Vladimir Putin was keen to stress when he signed the deal with Chancellor Faymann is that contracts for South Stream are signed and sealed while, he said, the Nabucco project is still negotiating to get gas suppliers on board.